Introductory statement to the press conference (with Q&A)

Mario Draghi, President of the ECB,Vítor Constâncio, Vice-President of the ECB.Bratislava, 2 May 2013

Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. I would like to thank Governor Makúch for his kind hospitality and express our special gratitude to his staff for the excellent organisation of today’s meeting of the Governing Council. We will now report on the outcome of today’s meeting, during which we took a number of decisions on key ECB interest rates, liquidity provision and possible ways forward to enhance the provision of credit. The meeting was also attended by the Commission Vice-President, Mr Rehn.

First, based on our regular economic and monetary analyses, we decided to lower the interest rate on the main refinancing operations of the Eurosystem by 25 basis points to 0.50% and the rate on the marginal lending facility by 50 basis points to 1.00%. The rate on the deposit facility will remain unchanged at 0.00%. These decisions are consistent with low underlying price pressure over the medium term. Inflation expectations for the euro area continue to be firmly anchored in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. In keeping with this picture, monetary and loan dynamics remain subdued. At the same time, weak economic sentiment has extended into spring of this year. The cut in interest rates should contribute to support prospects for a recovery later in the year. Against this overall background, our monetary policy stance will remain accommodative for as long as needed. In the period ahead, we will monitor very closely all incoming information on economic and monetary developments and assess any impact on the outlook for price stability.

Second, we are closely monitoring money market conditions and their potential impact on our monetary policy stance and its transmission to the economy. In this context, we decided today to continue conducting the main refinancing operations (MROs) as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of the 6th maintenance period of 2014 on 8 July 2014. This procedure will also remain in use for the Eurosystem’s special-term refinancing operations with a maturity of one maintenance period, which will continue to be conducted for as long as needed, and at least until the end of the second quarter of 2014. The fixed rate in these special-term refinancing operations will be the same as the MRO rate prevailing at the time. Furthermore, we decided to conduct the three-month longer-term refinancing operations (LTROs) to be allotted until the end of the second quarter of 2014 as fixed rate tender procedures with full allotment. The rates in these three-month operations will be fixed at the average rate of the MROs over the life of the respective LTRO.

Third, the Governing Council decided to start consultations with other European institutions on initiatives to promote a functioning market for asset-backed securities collateralised by loans to non-financial corporations.

In the meantime, it is essential for governments to intensify the implementation of structural reforms at national level, building on progress made in fiscal consolidation and proceeding with bank recapitalisation where needed. Furthermore, they should maintain the momentum towards a genuine Economic and Monetary Union, including the swift implementation of the banking union.

Let me now explain our assessment in greater detail, starting with the economic analysis. Real GDP contracted by 0.6% in the fourth quarter of 2012, following a decline of 0.1% in the third quarter. Output has thus declined for five consecutive quarters. Overall, labour market conditions remain weak. Recent developments in short-term indicators, notably survey data, indicate that weak economic sentiment has extended into spring of this year. Looking ahead, euro area export growth should benefit from a recovery in global demand and our monetary policy stance should contribute to support domestic demand. Furthermore, the improvements in financial markets seen since last summer should work their way through to the real economy. At the same time, necessary balance sheet adjustments in the public and private sectors will continue to weigh on economic activity. Overall, euro area economic activity should stabilise and recover gradually in the second half of the year.

The risks surrounding the economic outlook for the euro area continue to be on the downside. They include the possibility of even weaker than expected domestic and global demand and slow or insufficient implementation of structural reforms in the euro area. These factors have the potential to dampen confidence and thereby delay the recovery.

According to Eurostat’s flash estimate, euro area annual HICP inflation was 1.2% in April 2013, down from 1.7% in March. This decline in the annual inflation rate reflects a significant fall in energy prices, but is also due to a sizeable transitory effect coming from the annual rate of change in services prices on account of the timing of Easter. Inflation rates could remain subject to some volatility throughout the year. Looking further ahead, underlying price trends should persist and, over the medium term, inflation expectations remain firmly anchored in line with price stability.

Taking into account today’s decisions, risks to the outlook for price developments are broadly balanced over the medium term, with upside risks relating to stronger than expected increases in administered prices and indirect taxes, as well as higher commodity prices, and downside risks stemming from weaker economic activity.

Turning to the monetary analysis, recent data confirm that the underlying pace of monetary expansion continues to be subdued. Annual growth in broad money moderated in March, standing at 2.6%, after 3.1% in February. The annual growth rate of the narrow monetary aggregate, M1, increased slightly further to 7.1% in March, reflecting the continued preference for the most liquid instruments in M3. Deposits with the domestic money-holding sector continued to grow further in most stressed countries in March.

The annual growth rates of loans (adjusted for loan sales and securitisation) to non-financial corporations and households have now remained broadly unchanged since the turn of the year, standing in March at -1.3% and 0.4% respectively. To a large extent, weak loan dynamics reflect the current stage of the business cycle, heightened credit risk and the ongoing adjustment of financial and non-financial sector balance sheets. The recent Bank Lending Survey (BLS) confirmed weak demand for loans in the euro area. While some signs of stabilisation are emerging, the Survey on the access to finance of small and medium-sized enterprises (SMEs) in the euro area indicates continued tight credit conditions, particularly for SMEs in several euro area countries. Moreover, the available information indicates high risk perception on the part of banks.

In order to ensure adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential that the fragmentation of euro area credit markets continues to decline further and that the resilience of banks is strengthened where needed. Progress has been made since last summer in improving the funding situation of banks, in strengthening the domestic deposit base in stressed countries and in reducing reliance on the Eurosystem as reflected in repayments of the three-year LTROs. Further decisive steps for establishing a banking union will help to accomplish this objective. In particular, the Governing Council emphasises that the future Single Supervisory Mechanism and a Single Resolution Mechanism are crucial elements for moving towards re-integrating the banking system and therefore require swift implementation.

To sum up, taking into account today’s decisions, the economic analysis indicates that price developments should remain in line with price stability over the medium term. A cross-check with the signals from the monetary analysis confirms this picture.

With regard to fiscal policies, the spring 2013 deficit and debt data notifications by euro area countries indicate that the average government deficit declined from 4.2% of GDP in 2011 to 3.7% in 2012. Over the same period, the average government debt rose from 87.3% to 90.6% of GDP. In order to bring debt ratios back on a downward path, euro area countries should not unravel their efforts to reduce government budget deficits and continue, where needed, to take legislative action or otherwise promptly implement structural reforms, in such a way as to mutually reinforce fiscal sustainability and economic growth potential. Such structural reforms should target improvements in competitiveness and adjustment capacities, as well as aim to increase sustainable growth and employment.

We are now at your disposal for questions.

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Question: You have cut the key interest rate to 0.5%. Can you come up with some quantitative estimates for implications in the euro zone? Can you envisage a lower interest rate than 0.5%?

Draghi: The Governing Council has taken this decision consistent with the low price pressure over the medium term. As I said in the introductory statement, HICP inflation has gone down considerably. Even if you look at HICP inflation without food and energy prices, it has still gone down, but less markedly. Inflation expectations are well anchored in the medium term. As I have said, monetary and credit development have been subdued. Weakness in the fourth quarter of 2012 extended into the first part of this year. So, all in all, the Governing Council decided to go for a cut of 25 basis points, accompanied, however, and I would ask you not to underestimate the importance of the other measure, by maintaining the fixed rate full allotment policy until at least mid next year. The combination of the two measures is especially important and we can discuss this in the upcoming questions. At the same time, and this answers the last part of your question, we will certainly look at all the incoming data and carefully monitor developments. As I said last time, we stand ready to act if needed.

Question: What could be the effects of the interest rate cuts? Is there no risk of inflation, as you have said before?

Draghi: We act consistently with our analysis of price developments and in line with our objective of maintaining price stability in the medium term. The weak developments in the real economy, and on the monetary and credit side, warranted action by the ECB, so we decided to cut rates by 25 basis points and, as I have said, to maintain the fixed rate full allotment policy at least until July of next year. The combination of the two measures is important by itself. It ensures the smooth transmission of our monetary policy to money markets. The fixed rate full allotment policy will represent liquidity insurance for the banking system. So, frankly, fears over a lack of funding cannot be used as an excuse for not lending. At the same time, we believe that restricting the interest rate corridor will also dampen the volatility of the EONIA rate. In other words, this is a measure that benefits all kinds of banks: those that borrow at the EONIA, middle‑tier banks that do not have access to money markets but borrow at the MRO rate, and banks that are under ELA (Emergency Liquidity Assistance) and face restrictions regarding their collateral. So, this measure is addressed to all the different types of bank. We believe that this measure is going to be fully effective for at least two reasons. One is that we have seen signs that fragmentation is receding. The other is that the weakness in economic activity and the revised price stability projections for the medium term are also now affecting not only non-core economies, where one might have had doubts about the monetary policy transmission mechanisms, but also core economies, where these issues never existed. So this measure is addressed to a broad set of banks, and we believe it is going to be more effective today than it would have been a few months ago.

Question: Would you say today’s rate cut is too little too late? Unemployment is at a record high, there has been a sudden fall in inflation this month, and with everything you have just said, it sounded a bit like you are implying that you see that as a one-month blip in the data on inflation, even though you are expecting some volatility over the year. Could you say a bit more on that?

Second, are you the last austerity hardliners left standing? You had an interesting part at the end of the introductory statement about government debt levels and budget deficits, and obviously, this has been a subject of discussion over the last few weeks – the austerity versus growth debate. Do you feel like you are the only ones left arguing that we need to keep up the fiscal consolidation efforts?

And if I can just crowbar in a last question?

Draghi: No, how many questions were that?

Question: That were two.

Draghi: Two! Then I will answer the first two questions.

Let me just remind everybody that the ECB’s monetary policy has been extraordinarily accommodative throughout the crisis and is evident from the way financing conditions have changed: since 26 July 2012 stock markets have gone up in Germany, France, Italy and Spain, from 22% to 38%. And just in the last month, stock markets went up again in Italy and Spain, by something like 10%. TARGET2 balances have decreased and, if I am not mistaken, are now €256 billion off their peak, a decrease in TARGET2 balances is the best sign we have that there has been a gradual return of confidence. Of course, I say “gradual”, because given the seriousness and the gravity of the previous situation, you would not expect such a change to take place all of a sudden. Furthermore, ten-year sovereign bond yields went down in the stressed countries by more than 200-300 basis points, and even in France, by 53 basis points. Finally, for banks that finance themselves in the interbank market, the EONIA is around 6 -7 basis points, i.e. almost zero. All this, I would say, points to a very significant easing in financing conditions, so that it cannot really be said that monetary policy has not been accommodative. Today’s decision took this evidence into account. We monitor all data very closely and stand ready to act when needed. There is also increasing evidence, as I said a minute ago, that this standard monetary policy measure will be more effective now than it would have been a few months ago.

With regard to the austerity versus growth debate, I think it is an interesting one, but I would like to make a few points. The crisis has had two stages. First, there was the realisation after the financial crisis that the levels of bank capital ratios and government debt ratios were not sustainable. This belatedly, led governments to start a fiscal consolidation.

Second, there was the expectation, that self-fulfilling expectations of a disruptive scenario, or what we call tail risks, would gain momentum. For this reason we launched the OMT. We are therefore left with the memory of the previous situation, to which I am sure no government wishes to return. So, what is the message that the ECB has been conveying for some time now?

First, don’t unravel the progress you have already made. And there is no doubt that significant progress has been made in terms of fiscal consolidation throughout the entire euro area. Don’t unravel that.

Second, fiscal consolidation is, and I have said this from the very beginning of my tenure, contractionary in the short and medium term. Therefore, you may want to take action to mitigate the contractionary effects of this. But, how do you do that? Well, there are three ways. First, fiscal consolidation should be based on reductions in current expenditure rather than increases in taxes. Unfortunately, many of the fiscal consolidation measures were implemented in an emergency situation, with most governments choosing the simplest route, which was to raise taxes. And here we are talking about raising taxes in an area of the world where taxes are already very high, so it is no wonder that this had a contractionary effect. However, now that there is more time, there could be a shift towards reducing current government expenditure and lowering taxes.

Third, a key issue of fiscal consolidation is credibility, and the credibility of a multi-year fiscal consolidation plan is ensured by a detailed medium-term fiscal consolidation framework. There are countries not only in the euro area, but also in the European Union, which actually have a very credible fiscal consolidation framework, and for this they have been rewarded with much lower interest rates on their sovereign bonds.

Fourth, progress needs to be made with structural reforms. Many of the problems that we see today in terms of competitiveness, the labour market and taxes have nothing to do with monetary policy. They cannot be fixed by monetary policy. They can only be fixed by changing what is wrong in these three areas.

Question: Can I just quickly just follow up on that?

Draghi: Let me add one more thing. We have discussed, on many occasions, the fragmentation and differences in lending rates across the euro area. A key step here, as I said in the introductory statement, is the “swift implementation” of a banking union through the establishment of the Single Supervisory Mechanism.

Question: Was the decision to cut interest rates unanimous?

Draghi: I was just wondering how long it would take to get this question. There was a very strong prevailing consensus towards an interest rate cut, and within that, there was a prevailing consensus for a cut of only 25 basis points.

Question: When you said that there was a prevailing consensus for a cut of only 25 basis points and you stand ready to act, is there room to cut interest rates further, including the deposit rate which you did not touch today?

And I wanted to ask you on the consultations you are starting on creating a market for asset-backed securities. What exactly do you have in mind, and are you potentially solving one problem by creating an entirely new problem, given that asset-backed securities were the root, at least in the United States, of the financial crisis of 2008 and 2009? So, are you potentially creating a headache down the road?

Draghi: On the first part of your question, I think I did respond before, saying that we will look at all the incoming data and will monitor them closely and we will stand ready to act if needed.

On the deposit facility rate, we said it in the past: we are technically ready. There are several unintended consequences that may stem from this measure. We will address and cope with these consequences if we decide to act. We will look at this with an open mind and we stand ready to act if needed.

On the other part, it is actually broader than a standard measure category and it relates to funding measures, broadly defined. One is collateral, and the second set has to do with purchases of assets. Now, you have got to be careful here, because let me say once again what the ECB cannot do. The ECB certainly cannot supplement governments for their lack of structural reforms. Secondly, the ECB cannot clean banks’ balance sheets. And third, the ECB is not in the business of monetary financing, i.e. buying government bonds. When you consider all this, you look at what assets could be purchased and then you look at what sort of financial infrastructure the Europeans have. And it is different from the United States. In the United States 80% of credit intermediation goes via the capital markets. Capital markets rate and price assets in a right or wrong way, but it’s fairly transparent. In the European situation it is the other way round. 80% of financial intermediation goes through the banking system. So, you are left with buying what? SME loans, residential mortgages and mortgages to non-residents and a few other types of loans. Now, this makes the problem much more complicated, if one decides to take this way and really all the options are still very open here. By the way, let me say that our thinking is very much in a preliminary stage, given the complexity of the issue, so we have not reached any conclusion either way. But if you go this way, you want to find a way of packaging these loans in a way that they can be priced. And that is where the reference to other institutions more suited for this job of packaging and guaranteeing the loans comes in: the reference to the European Investment Bank and the reference to the European Commission itself.

Regarding the ABS, you are absolutely right, ABS have a very bad name, but one should say that there were very different kinds of ABSs. One was the so-called plain vanilla ABS box. You open the box, and you know exactly what is inside. So, if you for example put some mortgages there, it would be like a covered bond. A different thing was the squared ABS, etc., that are infamously known to have been one of the causes of disruption in the financial markets over the last few years. But we are far from reaching any conclusion. We are looking at all possible options, we are aware of the importance of this and we are also aware of what we can do and what we cannot do.

Question: Mr Draghi, today you cut interest rates and the euro rose at first. Now it just turned around after your comments about the deposit rate. So, my question would be, is that a reason for concern and do you thinks the deposit rate is more important than the benchmark rate?

And my second question: Chancellor Angela Merkel recently said that if you speak about Germany, you would have to raise interest rates. What do you make out of these comments and is she correct?

Draghi: Well, on the first part, I really do not have much to say. I am obviously aware that markets read and understand and try to interpret any remark made by the President of the ECB in these press conferences. But we should never forget that our objective is to maintain price stability in the medium term and not to be caught by the market reactions. That is very important to remember. And in this case, of course, besides price stability, we see the weak economy and the weakness that continues to linger over the first part of this year.

On the second question, first of all, ECB independence is dear to all, and especially, I would say, to German citizens. Second, I think too much was made of that comment. The comment really if you take it literally, meant to say, look, we have a different situation here in the euro area. We have 17 countries and the business cycles of these 17 countries are not exactly the same; they are not synchronous and they differ very much across the area. So, the monetary policy measures which can benefit some countries may not benefit others. Given the weakness that also extends to the core economies, we think it does benefit everybody. But it was not a comment that was meant to infringe upon the independence of the Governing Council, I am absolutely sure of that.

Question: You described how the OMT programme has brought calm to the financial system during the last six or seven months and we have seen the rates of sovereign bonds come down significantly. But we have not seen the rates for small and medium-sized companies come down. Could you explain why that has not happened and what this means for OMTs as an instrument for addressing the fragmentation problem?

My second question is about the programme for asset-backed securities (ABSs) you mentioned. Did I understand correctly that the ECB is thinking about buying ABSs or is it all about collateral and lending?

Draghi: On the second question, no, I don’t think you understood correctly. We have a task force with the EIB and we view this institution as the best suited to handle matters in this field. We do not have a precise position on what we will do. Moreover, you have to consider that the ABS market is dead and has been dead for a long time. And this is the case for a variety of reasons. One is the regulatory situation regarding ABSs. Another is that very low interest rates do not make ABSs a particularly convenient instrument for funding an institution. So there are many obstacles to overcome before I will be able to give you a precise description of what we have in mind. The OMT programme removed the tail risk and has been a very powerful instrument in this regard, but we should not forget that the funding crisis that the banks experienced dating back to mid-2011 caused a credit contraction, of which we are victims even today. It has been a gradual, slow and long process of credit contractions. The two longer-term refinancing operations avoided a worsening, or even a collapse I think, of the situation and then the OMT programme removed the tail risk for the euro area. But then you have to gradually unravel the fragmentation that have taken place before the OMT programme and in the end - as I said - started really by September 2011.

However, to say that everything is bad would not be correct. Let me give you a few facts on how we view the current state of fragmentation. As I said at another time, you have two sides to fragmentation. You have the funding side and the lending side. Now, we definitely see progress on the funding side. And this progress is documented by the fact that domestic deposits continue to increase in all the banks of all the stressed countries, or almost all I think. The second thing to consider is the dispersion in the growth rates of deposits. If you look at how fast these deposits are growing and at the dispersion of these growth rates across countries, you will see that this continues to go down month after month. It is now at its lowest level since May 2010 and this is quite important. Third, capital inflows are continuing, which is also the other side of the coin of why the path of the euro continues to be strong, in spite of the weakness of the economy and in spite of the low prices – this is really the other side or in other words a return of confidence. Fourth, the claims on the Eurosystem by the banks continue to go down and, since July 2012, they have gone down by €400 billion. Incidentally, we have not seen any of the awful, terrible risks that were predicted at the time. Finally, the TARGET2 balances – as I have said before – are also down, they have stabilised. So are we saying that the fragmentation on the funding side is over and that everything is normal? No! An interesting fact was pointed out to me this morning. A bank issued a bond in Munich and in Milan, an uncollateralised senior bond, so not a covered bond, and there was spread of roughly 150 or 200 basis points between the two. This is the same bank issuing in two different sovereign jurisdictions.

On the lending side, progress is more muted, but here I would point out something that could be a source of comfort. First of all, we are observing a stabilisation in the dispersion of lending rates. This has been increasing and increasing and now it seems to be stable, or at least the values of the dispersion are no longer going up. The second point is that the bank lending survey shows that there is a smaller increase in tightening. In other words, banks in the stressed countries continue to tighten, but at a slower pace. The third thing to consider is the information provided by the survey of small and medium-sized enterprises (SMEs), which is in a sense to me probably the most important source of information. According to this information, where you asked them “What is the share of rejections of loan applications? This has gone down. Second, you asked them “What sort of financial obstacles do you find in applying for a loan?” There are three points to consider. First of all, as I mentioned, is the rejections. Second is that SMEs may be given an amount which is lower than the amount they asked for. Third, the banks may ask for an interest rate that is so high, that the SME has to say “thanks, but no thanks”. We can see that the survey responses relating to these so-called financial obstacles are improving significantly in some of the stressed countries. And by the way, in Germany, there has been an improvement across the board. For instance, with regard to the availability of loans for the euro area, there has been a significantly smaller deterioration, and the same is happening at the country level for Spain and Italy, and obviously for Germany and so on. Looking at these survey data, I would not conclude that there is no more fragmentation, but we are observing improvements. The problem, of course, is that – as I said at the beginning - this credit contraction has been ongoing for a long time and has been compounded by the short-term contractive effects of fiscal policies. So unravelling this will not be achieved in a day.

Question: I would like to follow up on the question of growth versus austerity because the debate is also quite vocal in Slovakia. You have said that some of the austerity measures taken by Member States were taken in an emergency situation and that they were not the best measures. So, would you say that, possibly for the near future, a compromise solution to prevent another similar emergency could be that the countries which have already cut their deficits, at least to the 3% of GDP euro area limit, could slow down consolidation so that they do not have to cut their GDP deficit by 0.5% in the coming years, but maybe by a lower amount, in order to support economic growth in these countries? This is, for example, the political argument in Slovakia.

Draghi: First of all, the ECB does not have the final say on this. Let’s never forget this. I deliberately used the word “do not unravel the progress that you have achieved” and, if your country needs time, the trade-off for having more time should not be to compromis e on the ultimate objectives set by the European Commission, but to have structural reforms in place, revisit the composition of the fiscal adjustment and have a medium-term framework which is strong and credible.

Question: Many members of the ECB have said that a rate cut will have little effect in the current situation, with regard to the lack of transmission of monetary policy. So why have you cut rates now? And have you discussed in more detail the measures that would be needed in order to re-establish the transmission of your monetary policy?

Draghi: As I said before, several encouraging signs with respect to the declining fragmentation led us to this decision. Let’s not forget the other fact that the weakness has now spread to countries where the issue of transmission, or the lack of it, had never existed. In other words, we know that standard monetary policy measures are effective. I think these are the two predominant considerations.

Why is the demand for credit subdued? There are, as always, reasons of supply and demand. In relation to demand, the economy is indeed weak, and it is weak in its domestic components: consumption and, especially, fixed investment. The bank lending survey and the survey of small and medium-sized enterprises (SMEs) suggest that the dominant factor explaining the low demand for credit is macroeconomic uncertainty, and this goes together with risk aversion, which actually plays a role on both sides, it affects both supply and demand. But, this is limited to some countries. There is also the issue of deleveraging. The deleveraging process is not something that only banks may have to do in some countries, but it is also something that a bank’s clients may have to do. Some corporations, SMEs and households have to deleverage. This is not a euro area problem, but it is certainly a problem in some stressed countries. This too explains low demand.

On the supply side, you have, predominantly, the issue of risk aversion. As I have said, we look at all incoming data but, at this point in time, we cannot say that funding worries are a dominant factor in restricting credit supply. We do not see that. But we have to project this for the coming months, and it is certainly true that we will have another temporary surge in bank bond maturities within the next fifteen months. However, it is predominantly risk aversion that makes supply tight. It is the fact that, in some cases, many banks that did not have any toxic assets and were not especially weak at the beginning of the crisis have become weaker because of the rising share of non-performing loans. Recessions are, in a sense, like a spiral; fortunately, these are not euro area problems, these are limited problems, but some of these banks will have to strengthen their capital positions in order to get back on dry land.

Question: Just two questions: first, is there any update on when the Irish promissory note deal will be reviewed by the ECB? And second, just in terms of bank recapitalisation, I am just wondering how much is the Bank worried about the banking sectors in peripheral countries? And the Irish central bank governor said this week that Irish banks might need more capital. Do you think that a stress test is required before Ireland exits the bail-out at the end of this year? There is some talk in Ireland that perhaps it should be put back until next year as part of the EBA stress test.

Draghi: On the first question, there is no change, so that it is as it was before. And, on the second question, it is too early to respond to this question. It is something that is been discussed, and there are pros and cons, there are views that are different, so that it is at a stage in which we are really putting our views together, so that we will have to see what is best for Ireland.

Question: I don’t know whether the Governing Council was aware of it, but while it was meeting, the Pope was tweeting his unhappiness about the unemployment situation and expressing some frustration that people appear to be profiting at this time from rises in financial markets, even as unemployment hits new record highs.

So, I have a two-pronged question: first, are you frustrated with the perception that the ECB seems to be supporting financial markets, but not doing much to help the real economy in the Eurozone?

And the second point to that would be: I sensed – when I heard you talking at the beginning of this press conference – a little bit of frustration about the way banks are not taking more risks onto their own balance sheets. Is it not time that the ECB took that risk onto its own balance sheet, and expanded its balance sheet, the rules notwithstanding at this stage?

Draghi: We are - I would not use the word – well, ja I would use the word “frustrated”, yes, certainly. We can see improvements in the financial markets. We think financial markets are the only, and the necessary, channel through which monetary policy is transmitted. We don’t go around with helicopter money, throwing money around. In Europe, you have to go through banks. You don’t have capital markets of the kind you have in the United States, so that we have to proceed via the banking system. That is why, in my press conferences, I try to give you a very detailed reading of different indicators: because this shows how closely we are trying to examine and analyse reality, to see whether the impulses that we have been transmitting into the economy for a long time now are being translated into better welfare, lower unemployment, and better economic activity. So, no doubt about that.

On the second point of your question, on whether the ECB would take risks onto its balance sheet, I have actually gone through that a moment ago, and I think that I have shown you how far more difficult this problem is in Europe than it is in the United States. And therefore, I think that, in judging the central bank, one should be aware of what its mandate is, of what it can do, of what the institutional set-up surrounding the actions of the central bank is. And the institutional set up is basically made up of two elements: First of all, there is the governments’ action and, second, there is the financial structure in which the central bank needs to act.

Graeff: We will close the press conference for today. We will just take a five-minute break and then be back for the ceremony of the new €5 banknote – in this room again, if you want to go out for 5 minutes. Thank you.